Good corporate governance critical for Africa’s growth
Lazarus Sauti
African Development Bank’s Regional Director for the East Africa Regional
Resource Center, Gabriel Negatu believes there are a number of opportunities
for countries within and across Africa to unlock their economic values.
These opportunities take in the continued discovery of oil and other
natural resources, coupled with a growing global demand for such resources; and
a rising middle class.
They also include improved access to information and communications
technology that enhances innovation and availability of information; the
continent’s increasing access to international capital; and improved
participation of the private sector as demonstrated by the increasing foreign
direct investment (FDI) inflows into the continent.
However, as noted by Good Governance Africa,
a research and advocacy organisation based in South Africa that works to
improve government performance on the continent, recent developments in Africa are
drawing increased attention to the continent, hence providing grounds for
cautious optimism.
This cautious
optimism takes in good corporate governance as Africa’s economic transformation
will not be sustainable if the continent does not improve its reputation for
corporate governance.
Africa,
therefore, needs good corporate governance to develop enterprises and
businesses that create wealth and employment for Africans.
Good Governance Africa thus says,
“Good governance is needed because bad governance has such devastating consequences
on people’s lives. Poverty, short life expectancies, violence, and a loss of
personal and civil liberties are all potential consequences of poor public and
corporate governance.
Edward Siwela, Executive
Director of the Institute of Directors Zimbabwe, further strengthens the
assertion that the African continent’s growth will be realised only if the
continent develops strong enterprises able to compete successfully in their
home and overseas markets.
“We know from
the experience of the developed world that governance is essential to sustained
corporate success. Therefore, Africa’s growth will be realised only if the
continent develops strong enterprises able to compete successfully in national,
regional and international markets,” said Siwela.
Sharing same
views with Siwela, Request Machimbira, the Group Chief Executive
Officer of PCG International Proficiency Consulting Group says without
good corporate governance, economic development would falter.
Speaking at a
recent seminar organised by the Southern African Association of Accountants in
Harare, Machimbira also added that lack of good corporate governance in today’s
companies has resulted in a declining economy.
“If we look at
most companies in Zimbabwe, there are people who are at certain positions but
if we ask what criteria were used for a particular person to be at a particular
position we will not find suitable answers. There are a number of people who
are doing wrong jobs and the end results are situations like corruption,” said
Machimbira.
The New Partnership
for Africa believes that good corporate governance is critical in attracting
foreign direct investment inflows. Thus, corporate entities in African
countries need to enhance good governance to realise their trade potential.
“Programmes and
projects to promote Africa’s development and regional integration can only
succeed when implemented where there is good governance. African countries
currently face challenges in economic and corporate governance – inflation,
debt-to-GDP ratios and budget deficit-to-GDP ratios.
“The NEPAD
Agency supports member states and regional economic communities as they tackle
these challenges and endeavour to create more favourable environments for development,”
noted NEPAD.
The good news is
that Africa’s premier multilateral
financial partner, the African Development Bank (AfDB), is always at the
forefront in pointing out that the African continent needs to enhance good governance
to realise its trade potential.
Negatu, the bank’s Regional Director for the East Africa Regional Resource
Center, notes that the Bank and the continent are striving to build shared
prosperity in African countries, simply by promoting good governance and
leadership.
“AfDB and its member countries have taken major strides to improve
governance and leadership, necessary for shared prosperity,” he explained,
adding that Africa needs “clear, straight
forward policies” to enhance good governance and to take the industry forward.
To take African
industries forward, corruption
must be addressed and curbed as ethics and good corporate governance imply
intolerance to corrupt practices in business. To effectively curb corruption,
the African business community should, therefore, become increasingly
intolerant to corruption of corrupt business practices.
This also means African governments; nongovernmental organisations,
strategic stakeholders and civil society organisations across the continent
must join hands to address corruption.
Policy decision makers in civil society organisations should also play a
watchdog role by being increasingly vocal in fighting corruption tendencies in
business enterprises. Empowered by advances in information and communication
technology, they should provide a crucial complement to governments and the
private sector, and keep both sides accountable to each other and to the
people.
To show commitment to principles of corporate governance, there is strong
need for Public-Private Partnerships to provide for innovative approaches that
could be used to meet the capital requirements for an adequate and sate of the
art infrastructure.
More so, political and business leaders must
support the development of the code of corporate governance in their respective
countries in order to enforce high standards of ethics in public and private
sectors. This is so because corporate governance is one area of International
Standardisation that covers good managerial and organisational practice.
It is also critical for African countries to combine their respective national
codes with international judicial mechanisms.
Frankly, corporate governance is a necessary lever in creating competitive
and efficient business enterprises and in enhancing the accountability and
performance of those entrusted to manage corporations. Without efficient corporates,
countries in Africa will not create wealth. Accordingly, the need for good
corporate governance in Africa is a self-evident proposition.
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